A recent article in the New York Times offered insights into the fact that the passage of time after bankruptcy can go quickly and that there is hope for and promise of home ownership after someone loses their home and goes bankrupt.
Although personal bankruptcy remains on a consumer’s credit report for up to ten years, it does not usually keep someone from qualifying for a mortgage. The article noted that many who filed for bankruptcy during the last recession in 2009, are now applying and qualifying for mortgages.
When Can You Qualify?
Your waiting period for a mortgage depends partly on the type of bankruptcy that you declared and the kind of loan for which you applied. If you want to apply for a conventional loan and you were granted a Chapter 7 bankruptcy, you must wait four years from the discharge date before you can apply for a mortgage. For Chapter 13 bankruptcies, the waiting period is two years if you are applying for a Fannie Mae loan.
The Federal Housing Administration loan program is much more forgiving. For Chapter 7 bankruptcies, it is two years and for Chapter 13, it is only one. If you did file for Chapter 13, you must have kept current with payments under your reorganization plan and get permission from the court before applying for a loan.
If you managed to keep your home after your bankruptcy, you may be able to refinance at a lower rate. If you can get a lower rate, after rebuilding your credit, that should put you in an even better position financially.
If you lost your home and also filed for bankruptcy, there are actions that you can take to start rebuilding your credit. In order to qualify for a mortgage, you will need a credit score of about 680. Most people who file for bankruptcy end up with a score in the low 500s. A few things that you can do to get your credit score up to a level that will help you qualify for a mortgage include:
- Keeping your car payments current
- Applying for a secured credit card
- Eventually getting a gasoline and/or store credit card
- Keeping current on all bills
How long does it take to get your credit score from the low 500s up to the high 600s? This is often a four to five year process. Also, consider carefully if you really are ready to once again take on a mortgage. One thing that you do not want after going through personal bankruptcy is the stress and strain of making mortgage and property tax payments before you’re ready for them.
Hope after Bankruptcy
In 2010, personal bankruptcies topped out in the U.S., as approximately 1.5 million people filed. Many of those people are once again in a position to purchase a home. They cleared out their debt, rearranged their lives, and got onto building a new future. You can do the same.
If you are being crushed by your debt and are considering bankruptcy, contact the Law Office of Kelley & Fulton today at (561) 491-1200. We will be happy to review your options concerning bankruptcy and how either Chapter 7 or 13 can help you in the long run.